How’s the economy treating you? Chances are, your answer is colored mainly by three things: if you are working if you want to, how much you are making and how quickly your costs are increasing. Economists rely heavily on the same factors to judge the nation’s health. At last count, 9.4 of the workforce is jobless. Compared with a year ago, the products and services we produce are worth 5.7 less while the ones we purchase are 0.7 cheaper.

Two bright people may see sharply different things in those numbers. To one, the shrinking economy is a healthy unwinding of past extra, as an example, while to another it is a dangerous downturn that calls for bold government action. But what could happen if the numbers themselves are something we should be debating? In the alarming view of a vocal not many, America’s economic measures are misstated rigged, really.

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The accusation goes like this: Surveyors gather the nation’s data and statisticians compile and report it. Politicians naturally want the numbers to show improvement. Not being able to change the facts, they concentrate on the handling of facts, pressuring statisticians to change their measurements. It is not quite one great conspiracy but decades of minor ones compiled. Today’s reports are so perverted, the hypothesis holds, that the numbers Detached From common experience.

Pollyanna Creep

If the hypothesis has a chief architect, it’s John Williams, a semi retired grandfather of five living in Oakland, Calif. The son of a chainsaw importer, Williams sold the family business in the 1970s and began consulting for corporations, recalculating government economic data to arrive at what he says were more dependable measures, and with them, truer forecasts. Today Williams runs Shadow Government Statistics ShadowStats.Com From his home. For $175 a year subscribers get economic data and analysis adjusted to back out the accumulated effects of what Williams has called the Pollyanna Creep Pollyanna being the orphan protagonist of the 1913 children’s book who learns to play the “glad game” to find cheery views on life’s sorrows. In other words, he gives figures he feels are properly depressing, to offshoot government ones he says are too prettied up.

If Williams is right, unemployment is over 20, gross domestic product is shrinking by 8 and buyer prices are jumping by almost 7. His forecasts border on apocalyptic. The government is creating so much new money, he says, that the all but inevitable result is hyperinflation, where “your highest denomination, the $100 bill, becomes worth more as toilet paper than money.” purchase physical gold, he advises.

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Whether we think the forecasts or not, the possibility of a Pollyanna Creep has serious implications. Social Security payments are just one benefit adjusted yearly for increases in the cost of living. If the figures had not been corrupted, says Williams, checks may be close to double what they’re.

Williams Managed To attract lots of press. A year ago, Harper’s magazine shown a cover drawing of a grinning Uncle Sam fondling numeral shaped party balloons, with the headline, “Numbers Racket: Why the Economy is Worse Than We Know.” The story focused on Williams’ data. The San Francisco Chronicle followed with “Government Economic Data Misleading, He Says.” Last fall in the London Times: “Forget Short Sellers and Manipulators, Pollyanna Creep may be the Culprit.”

Government statisticians are irritated. “Economic Data looks Accurate” does not make for a catchy headline, so the press, they are too fast to give credence to conspiracy theories. “We go out of our way to be transparent,” says Thomas Nardone, who throughout 32 years at the Bureau of Labor Statistics helped implement many of the changes in calculating the unemployment rate. “We’d be remiss if we did not make changes,” he says. “I’ve never seen measurement changes that were politically motivated.”

Katherine Abraham served as commissioner of BLS throughout the Clinton governance. Commissioners, unlike the statisticians who work for them, are political appointees. Now a professor at University of Maryland, Abraham says she did see political pressure, but rarely, and never with results. Once, she says, a prominent lawmaker told her the BLS may get more financial support if it could agree to propose changes that decrease the look of inflation. Abraham says she rebuffed the offer.

Decide for yourself. Here is a roundup of measurement changes at the heart of Williams’ claims, with responses from people who work closely with the measurements. I will concentrate on unemployment and inflation, but not GDP, since the chief flaw with it, as indicated by Williams, is how problems with the inflation measure overstate real, or after inflation, growth. There’s a different case to be made that GDP measures many pretty undesirable things, like the cost of war and divorce lawyers, and so is not a great proxy for economic well being but I will save that subject for another day.

Disappearing Jobless?

About 13 million people were unemployed throughout the Great Depression, or around 25 of the work force, but they are pretty recent estimates. At the time, the government simply did not track data like it does today, which made it hard to judge if things were to get better or worse. Two major developments in the 1930s made tracking unemployment feasible. The 1st was an improvement in the way statistics were used to turn a comparatively small sample into a faithful representation of the bigger population. That allowed for the use of surveys. The second was the notion of basing one’s position as part of the unemployed work force on actions. If someone wants to work, after all, is a subjective thing. If they are looking for work isn’t.

Today the BLS reports six measures of unemployment, called U 1 through U 6, for which the meaning of unemployment slowly broadens. As an example, 4.5 of the work force was unemployed for 15 weeks or longer and is actively looking for work U 1, while 15.8 is unemployed if we count those who say they want work but are not looking, and those who work part time for lack of full time alternatives U 6.

Williams takes issue with a 1994 change that coincided with a shift to computerized data collection from pencil and paper. Till then, a discouraged worker was someone who wanted to work but had given up looking because there were no jobs. The BLS tightened the limitations with extra questions, which reduced the ranks of discouraged workers by half. As Williams puts it, “The Clinton governance dismissed to the non reporting netherworld about five million discouraged workers.” Add those in, he says, and unemployment approaches Great Depression levels.

Nardone, the longtime BLS economist who today serves as helper commissioner for current work analysis, says the 25 unemployment rate frequently cited for the Great Depression is depending on research that corresponds with today’s U 3, the unemployment rate most usually stated by the media. It stands at 9.4, recall not close to Depression era levels. The 1994 changes did decrease the ranks of discouraged workers, but also presented a new category: the marginally attached, who want jobs but are not looking for reasons like transportation problems and child care prerequisites. The most usually watched measure now U 3, before the change U 5 is usually unaffected, since it does not include discouraged workers. The benefit of the changes, explains Steven Haugen, a BLS economist, is a less subjective measure of discouragement, and many extra ways to judge if the nation isn’t only working, but working up to its capability. Williams says the change reduced the broadest measure of unemployment in a way that “doesn’t match with public view, and for good reason.”

For a BLS paper reporting changes to its unemployment measure, see Here.

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